Bank Audit Asset Classification to be borrower-wise and not facility-wise

  1. The increase in scope and size of the project takes place before commencement of commercial operations of the existing project.
  2. The rise in cost excluding any cost-overrun in respect of the original project is 25% or more of the original outlay.
  • The bank re-assesses the viability of the project before approving the enhancement of scope and fixing a fresh DCCO.
  1. On re-rating, (if already rated) the new rating is not below the previous rating by more than one notch.
  • Exceptions/ Clarifications
  • Accounts with temporary deficiencies:

An account should not be classified as NPA, if the deficiencies like non-submission of stock statement, non-renewal of facility in the account are temporary in nature, etc. RBI’s guidelines in this regard are as under:

  1. Drawing power is required to be arrived at based on the current stock statement.

However, considering the difficulties of large borrowers, stock statements relied upon by the banks for determining drawing power should not be older than three months. The outstanding balance in the account based on drawing power calculated from stock statements older than three months, would be deemed as irregular. A CC/OD account would become NPA if such irregular drawings are permitted in the account for a continuous period of 90 days. For example, if borrower is allowed drawing on the basis of stock statement of August 2014 for next three months, then it would be irregular from December 2014. If the borrower does not submit fresh stock statement then the account would become NPA in March 2015.

  1. An account, where the regularladhoc credit limits have not been reviewed/renewed within

All the facilities granted by a bank to a borrower
and investment in all the securities issued by the
borrower will have to be treated as NPA/NPI and not
the particular facility/investment or part thereof
which has become irregular. However, there are few
exceptions to this guideline.

180 days from the due date/date of adhoc sanction, will be treated as NPA.

  • Asset Classification to be borrower-wise and not facility-wise

All the facilities granted by a bank to a borrower and investment in all the securities issued by the borrower will have to be treated as NPA/NPI and not the particular facility/investment or part thereof which has become irregular. However, there are following exceptions to this guideline:

  1. Under the on-lending system, only that particular credit facility granted to PACS/FSS which is in default will be classified as NPA and not all the credit facilities sanctioned to a PACS/ FSS.
  2. Any amount, representing positive mark-to- market value of the foreign exchange derivative contracts (other than forward contract and plain vanilla swaps and options) that were entered into during the period April 2007 to June 2008, which has already crystallised or might crystallise in future and is/becomes receivable from the client, even if overdue for a period of 90 days or more, will not make other funded facilities provided to the client, NPA on account of the principle of borrower-wise asset classification, though such receivable overdue for 90 days or more shall itself be classified as NPA, as per the extant IRAC norms.
  3. In respect of additional facilities sanctioned under the rehabilitation package approved by BIFR, classification norms will become applicable after a period of one year from the date of disbursement, e., additional facility can be treated as standard upto one year from the date of disbursement.
  • Advances under consortium arrangements

Asset classification of accounts under consortium should be based on the record of recovery of the individual member banks and other aspects having a bearing on the recoverability of the advances. Where the remittances by the borrower under consortium lending arrangements are pooled with lead bank and the lead bank is not parting with the share of other member banks, the account will be treated as not serviced in the books of the other member banks and therefore, be treated as NPA. If the bank is able to arrange to get their share of recovery transferred from the lead bank or get an express consent from the